AIM Rule 26

Rockhopper Exploration plc (“Rockhopper”) is an AIM listed oil and gas exploration company based in the UK with interests in the Falkland Islands and the Greater Mediterranean region. It was established in 2004 with a strategy to invest in and undertake an offshore oil exploration programme in the North Falkland Basin. It was floated on AIM in August 2005. Rockhopper is the largest acreage holder in the North Falkland Basin.

Rockhopper Exploration plc (the ‘Company’ or ‘Rockhopper’) is an AIM listed company and is required by the London Stock Exchange to apply a recognised corporate governance code. The Company is required to give details of how it complies with the chosen code and, where it departs from the code, provide an explanation of the reasons for doing so.

Historically, the board’s corporate governance policy has been to observe the provisions of the UK Corporate Governance Code (the ‘UKCG Code’) applicable to FTSE 350 companies as far as practicable given the size of the Company. A review of the Company’s corporate governance practice against the UKCG Code provisions has been undertaken annually by the company secretary and considered by the audit & risk committee which has reported to the board on the outcome of the review and any recommendations for changes to corporate governance practice.

In the light of the requirement to apply a recognised corporate governance code, the board has undertaken a review of both the provisions of the UKCG Code and the Quoted Companies Alliance Corporate Governance Code (the ‘QCA Code’) to assess which corporate governance code is appropriate for the company to apply at this stage in its development. The board has concluded that it would be appropriate for it to apply and report against the QCA Code, which has been designed for small to mid-sized companies and which has been adopted by many AIM listed companies.

The board will assess its compliance with the QCA Code on an annual basis and publish the status of compliance in its annual report and accounts. As part of the annual review, the board will consider whether it continues to remain appropriate to apply the QCA Code.

Chairman’s Governance Statement

The board recognises that good governance supports the execution of the company’s strategy and delivery of shareholder value. Rockhopper’s board, led by the chairman, is committed to maintaining high standards of corporate governance and to ensuring that the company’s values are promoted and its strategy clearly communicated across the Group and to shareholders and stakeholders.

The board has considered how the Company applies the ten principles of the QCA Code and this statement includes the required disclosures and explanations. Further details of the Company’s corporate governance practices are contained in the latest annual report and accounts.

As part of the review of corporate governance practice, the board has identified a number of areas of focus for the coming year including board structure, succession planning and performance evaluation.

Board of Directors

Board constitution

The board currently consists of two executive, a non-executive chairman and four non-executive directors including the senior independent director. The directors have a wide range of experience and skills across the oil and gas industry including technical, operational, commercial and financial both in the UK and internationally. Each of the non-executive directors have held senior management/board/advisory positions in the industry and bring relevant experience from their current and previous positions. The board is supported by a qualified company secretary.

All of the directors are subject to annual re-election by shareholders.

Independence of directors

The board considers that the chairman and the non-executive directors are all independent.

Other than any shareholdings in the Company and the receipt of fees for acting as directors, the chairman and non-executive directors have no financial interests in the Company or business relationships that would interfere with their independent judgement.

Division of responsibilities between Chairman and Chief Executive Officer (CEO)

There is a clear division of responsibilities between the Chairman and CEO which is set out in writing and has been approved by the board.

The Chairman’s key responsibilities are:

ensuring that the board delegates responsibility for executive management matters whilst retaining sufficient oversight to ensure the agreed strategy is delivered, objectives are met and board decisions are implemented

ensuring the effective running of the board and ensuring that the board as a whole plays a full and constructive part in the development and determination and approval of the company’s strategy and overall objectives

setting the agenda for board meetings and ensuring that the board receives timely and accurate information to enable it to focus on the key issues facing the company

ensuring that the board develops an understanding of the views of the major investors in the Group and are informed of shareholders views and concerns

ensuring that the overall composition of the board and board committees remains appropriate

overseeing the board performance process

promoting the highest standards of integrity, probity and corporate governance across the Group.

The CEO’s key responsibilities are:

all executive management matters affecting the company

implementing the decisions of the board and its committees and delivering against the agreed strategy and objectives

management of all staff matters below Board level

maintaining a dialogue with the Chairman on the key issues facing the Group

ensuring that the management team provides reports to the board which contain accurate, timely and clear information

leading and maintaining relationships with key external stakeholders including shareholders, regulators and Governments

promoting and conducting the affairs of the Group with the highest standards of integrity, probity and corporate governance.

Matters reserved for the Board

There is a schedule of matters reserved for the board for decision to ensure that the board exercises control over the key matters which could impact on delivery of the Company’s strategy. This is divided into the following categories:

Strategy and management – long term objectives and commercial strategy, budgets, operations overview, health and safety, new ventures

The board has six scheduled formal meetings each year with other meetings held as required. The chairman facilitates an annual strategy review and meets regularly with the non-executive directors without the executives present.

The appointment letters of the non-executive directors details the expected time commitment which is around 20 days a year. The non-executive directors undertake on joining the Company that they are able to allocate sufficient time to discharge effectively their responsibilities and are required to keep the board updated of any changes in respect of their other commitments. There is a process in place for dealing with any actual or potential conflicts of interest.

The board and its committees have full and timely access to all the relevant information required to enable them to discharge their duties effectively. All board members have access to the services of the company secretary to support them in this regard.

Board performance evaluation

An internal performance evaluation of the board and its committees and an appraisal of the chairman’s performance is undertaken each year.

Board performance appraisal – board members review a questionnaire which is focused on strategy, risks, performance against objectives, board processes, relationships and communication and board structure and development. The key conclusions are discussed at a board meeting and follow up action is agreed if necessary.In addition to the internal performance evaluation, an external performance evaluation of the board was undertaken in 2016 with specific focus on the skillset and structure of the board which was used as the basis for discussions on succession planning.

Chairman’s performance appraisal – this is coordinated by the senior independent director who consults each individual director for their view on the chairman’s performance.

Audit & Risk Committee performance appraisal – the senior independent director and company secretary review the performance of the audit committee based on the Financial Reporting Council’s guidance to listed companies on the composition, role and responsibilities of the audit committee. The key conclusions are discussed by the audit & risk committee and follow up action is agreed if necessary.

Board Committees

The board has established Audit & Risk, Remuneration and Nomination committees with formally delegated duties and responsibilities set out in terms of reference. The committee chairs report to the board on the matters discussed at each meeting.

The company secretary acts as secretary to all board committees and, in consultation with the committee chairs, ensures that committee members have access to all relevant information to enable consideration of the agenda items.

Audit & Risk Committee

The members of the audit & risk committee are Keith Lough as chairman, Alison Baker, Tim Bushell and John Summers. The board chairman, external auditor, the chief financial officer and Group financial controller are invited to meetings with observer status.

The main responsibilities of the audit & risk committee include reviewing and reporting to the board on matters relating to:

audit plans of the external auditor;

Group’s overall framework for financial reporting;

Group’s overall framework for risk management and internal controls;

corporate governance practice;

the accounting policies and practices of the Group; and

the annual and periodic financial reporting carried out by the Group.

Remuneration Committee

The members of the remuneration committee are Tim Bushell as chairman, Alison Baker, Keith Lough and John Summers. The board chairman is invited to meetings with observer status.

The main responsibility of the remuneration committee is setting and administering the remuneration policy for the Company and, within that context, approving adjustments to the salaries of the executive directors, any bonus awards and termination payments. The remuneration committee also sets the broad framework and reviews the recommendations of the CEO for salary adjustments and bonus payments for all other members of staff including the company secretary. The committee also administers and makes awards under the Long Term Incentive Plan and Share Incentive Plan.

Nomination Committee

The committee is chaired by the board chairman with all the non-executive directors as its members.

The main responsibilities of the nomination committee are to review the structure and composition of the board and its committees, identify and make recommendations for any changes to the board and to consider board member succession. The nomination committee also considers the scope of the board performance appraisal process.

Any decisions relating to the appointment of directors are made by the entire board based on the merits of the candidates and the relevance of their background and experience, measured against objective criteria. The results of the 2016 skillset review were taken into account when looking at proposed changes and reductions to the number of board members. The decision not to replace the chief operating officer was also taken as part the board performance evaluation process.

Senior management appointments are dealt with by the executive team which has regard to the resources needed to achieve the corporate objectives. There is no formal succession plan in place but an emergency cover plan has been agreed by the nomination committee in the event of the unavailability of key staff members.

Risk management

The board has ultimate responsibility for the maintenance of sound risk management and internal control systems across the Rockhopper group of companies.

The internal control system is designed to identify significant risks, the likelihood of their occurrence, the potential impact and mitigants and to monitor ongoing initiatives. The board receives an update from the executive directors on any developments in respect of the principal risks and uncertainties at the beginning of each board meeting and discussion of the agenda items takes place against that background. The audit & risk committee undertakes an annual review of the Company’s risk management and internal controls systems and processes. This is supplemented by reports from the external auditor as part of the annual audit process and ad hoc reviews by independent third parties.

Corporate culture

The Company is committed to ensuring that there is a healthy corporate culture and has put in place a number of policies and procedures which are designed to ensure that ethical and transparent behaviour is recognised and followed across the Group:

HSE Policy

Code of Business Conduct and Social Responsibility

Anti-Bribery and Corruption (ABC) Policy and Procedures

Share Dealing Code

New staff receive briefings from the company secretary on the corporate culture and third party consultants are required to comply with the Company’s ABC procedures and to refrain from dealing in Company shares for the duration of their contract.

Relations with shareholders

The Company engages with shareholders in a variety of ways:

Meetings: the executive directors meet regularly with major shareholders and the investment community which allows exposure to new investors. This process includes presentations, one-to-one meetings, analyst briefings and press interviews. The CEO regularly briefs the board on these contacts and relays the views expressed. Copies of analyst research reports, press reports and industry articles are circulated to all directors and ensures that the board is aware of the views of its major shareholders.

Website: the Company’s website is updated regularly with external presentations and corporate updates which ensures that existing and potential investors have access to up to date and relevant information.

Annual Report: the Company’s annual report gives a detailed overview of the Company’s strategy, operations, financial position, risk profile and remuneration structure and is available in hard copy and on the website. This ensures that existing and potential investors are provided with the information that they need to make an assessment of the Company’s performance and prospects.

Annual General Meeting (AGM): the AGM is attended by all directors. The chairman gives an overview of the Company’s performance in the period since the previous AGM and the CEO gives a detailed operational and financial update. The AGM is mainly attended by retail investors and gives them the opportunity to address questions to the board.

Engagement with stakeholders

The Board recognises that pro-active engagement with its stakeholders is an essential for successful delivery of the Company’s strategy.

The Company’s stakeholders include joint venture partners, contractors, consultants, staff, regulatory authorities and potential new venture partners and there is regular engagement with stakeholders through both formal and informal channels including public consultations where appropriate. Further details of how the Company engages with its key stakeholders is given in the Strategic Report of latest annual report and accounts.